Chicago-based Belly has convinced 2,300 businesses to try its digital loyalty platform, which awards consumers with points for their purchases and helps companies come up with memorable ways to reward customers, founder and CEO Logan LaHive said.

Personal touch

By getting creative, small merchants can exhibit their personality through the program, which can lead to Tweets and other social networking about them. Encouraging repeat purchases is the name of the game, and Belly uses the intelligence it gleans from consumers’ purchases to suggest relevant marketing offers. Customers with 250 points at AlleyCat Comics in Andersonville can earn the right to punch an employee of their choice in the stomach, while Belly users can learn three words in Korean for five points at Gosu in Chicago. Those who save up 1,000 points at Ben & Jerry’s can have an ice cream date with co-founder Jerry Greenfield, Belly said.

Solving the loyalty problem

LaHive launched the company as an entrepreneur-in-residence at venture incubator Lightbank in 2011, after having experience with a San Francisco biometrics startup, Pay by Touch, which raised $350 million before it fizzled, he said at a Tech Cocktail event Wednesday night.

Belly evolved from another mobile app concept LaHive conceived and presented to Lightbank’s Paul Lee, then to Lightbank backers Eric Lefkofsky and Brad Keywell of Groupon. “They absolutely hated my idea,” LaHive said. Still, they saw potential in LaHive, who also worked at Redbox before getting the entrepreneur’s itch. So Lightbank hired him to solve the loyalty problem for small businesses.

Starting with a pen and desk

It was the break he needed to get started, but he still had a lot to figure out.”People think there are all these magical networks that help you with your path,” he said. “My first day [at Lightbank], it was just, ‘Here’s a pen and a desk. Go ahead and get started.’ I had no idea what to do.”

He learned quickly enough. Belly landed AlleyCat Comics as its first merchant Aug. 5, 2011, and a month later Lightbank provided seed funding of $375,000, followed by $1 million in convertible notes in November 2011 and February 2012. Silicon Valley Bank of California also has provided capital, according to news reports. In April, venture capital firm Andreessen Horowitz agreed to provide $10 million to help Belly expand to new markets and offer new products. Belly is now in 11 markets, providing services to restaurants, retail, health and beauty merchants and service providers, the company said.

Belly started with the name “Bellyflop” because Lefkofsky owned the URL Bellyflop.com, LaHive said. But the name was shortened to Belly, for belly full of rewards, with the URL Bellycard.com to make it more appealing to retailers. Flop is now the brand’s mascot dog, he says.

While many small businesses use rudimentary punch cards for their loyalty programs, Belly works with merchants to devise custom digital rewards programs designed to keep consumers coming back. To keep it simple, its technology works with iPads it provides to merchants.

Gaining traction

To date, Belly has amassed more than 370,000 users who have redeemed more than 52,000 rewards, and it is adding 2,000 to 3,000 users per day, the company said.

While it took the company 166 days to garner its first 100,000 “check-ins,” where users swipe their Belly cards or apps using the merchants’ iPads, momentum built quickly. It hit 200,000 check-ins in the following 27 days and currently gets about 100,000 check-ins per week, the company said.

LaHive has been refining Belly through feedback from retailers. He made wireframes or PowerPoint presentations for various ideas and presented them to merchants asking whether they would pay for it. “It was hitting the streets,” he said.

LaHive quickly learned that a mobile app alone wouldn’t satisfy them, so the company has added a digital loyalty card that consumers can scan at an iPad at participating businesses. One card works for multiple Belly merchants, and half of Belly card holders have used it at more than one merchant. The company does not share data across merchants, but it does use transaction data to help companies create rewards, LaHive said.

Monthly subscription model

Belly uses a monthly subscription model with pricing determined by the amount of marketing support the client wants. Most merchants pay $50 to $100 a month for the loyalty program, which includes an iPad, marketing materials and data and analytics, according to an AllThingsD.com report.

While Belly entered what was largely a wide-open small business market, other companies are beginning to see potential in providing digital loyalty programs. Groupon launched its own loyalty program, GrouponRewards, in September 2011. And Cambridge, Mass.-based LevelUp has entered the Chicago market with a loyalty program for small businesses that allows consumers to pay for purchases with their smartphones, a feature Belly doesn’t currently offer.

Despite the funding and support from Lightbank and Andreessen Horowitz, LaHive said launching a startup is “the hardest job in the world.” Taking investment dollars doesn’t necessarily make it easier. “When you take on new investors, all it does is raise expectations. The job just keeps getting harder,” he said.

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